Around 11:00 a.m. on Saturday, March 22, a mudslide hit a neighborhood just outside of Oso, Washington. Forty-two people are known to have died because of the slide, and as of May 23, two people were still missing or unaccounted for. In addition to the tragic human loss, the neighborhood was destroyed. Governor Jay Inslee stated that the property damage reached $10 million.

HilltopThe people of Oso who were fortunate enough to survive the slide now must deal with the loss of their homes. Unfortunately, their homeowner’s insurance policies will not help them. A typical homeowner’s insurance policy does not cover mudslide damage. Policies in most states routinely exclude coverage for damages related to “earth movement.” The term “earth movement” is often defined as a loss caused or aggravated by “earthquake, landslide, mudflow, earth sinking, rising or shifting; volcanic eruption, explosion or effusion of a volcano.” Unless there is an additional policy purchased, or a rider attached to an existing policy, the homeowner must bear the loss without insurance. Interestingly, although the Pacific Northwest is an area that is prone to mudslides, the President of the Northwest Insurance Council, Karl Newman, estimates that only one percent of homeowners in Washington and Oregon have coverage for mudslides.

What kind of coverage protects against these losses? Unfortunately, it is not a simple matter of getting a rider added on to your policy. Homeowners who are at risk from mudslides will need to purchase what is known as “difference-in-conditions” insurance.

Difference-in-conditions insurance is secondary coverage that fills in gaps in the primary insurance policy. It is written in conjunction with other fire or homeowner’s coverage and is meant to provide protection against losses not covered by the primary policy. Some insurers are reluctant to offer difference-in-conditions policies, especially for commercial policyholders, because of the potential for catastrophic losses posed by the risks insured against. For this reason, the policies generally must be purchased from companies who specialize in high-risk policies. There are no standardized forms because difference-in-condition policies vary widely. Each policyholder must compare the exclusions contained in his or her homeowner’s policy with the terms in the differences-in-conditions policy.

If your property may be at risk due to its location or local natural conditions, you should review your coverage to see if that risk is excluded. Not every homeowner in Washington or Oregon is at risk of a mudslide (sadly, the risk to homeowners in Oso was known for some time), but those who are should know if coverage is excluded. Mudslides are not the only natural catastrophes excluded from homeowner’s coverage. Earthquakes—which, like mudslides, are “earth movements”—are another common exclusion. In California, where approximately 200 potentially dangerous geologic faults have been identified, homeowner’s insurers started leaving the state in the mid-1990s in response to a law that required them to provide earthquake coverage. No part of the state is considered “immune” from earthquakes (the 1994 Northridge earthquake occurred along a previously undiscovered fault), so the potential uninsured losses could have been devastating for the state. The state then established the California Earthquake Authority to provide an option for earthquake insurance coverage. The Authority has more than 800,000 policies in force throughout California—around seventy percent of the earthquake policies in the state.

Another common exclusion that is a potential issue everywhere is damage due to flooding. Most homeowners know that their policy does not cover flood damage unless they have purchased separate flood insurance coverage. The need for flood coverage for homeowners who live in a floodplain (defined by the National Flood Insurance Program as any land area “susceptible to being inundated by floodwaters from any source”) is made clear by lenders; in fact, flood insurance is required for federally-backed mortgages on property in 100-year floodplains (areas that have a 1% annual chance of flooding). The NFIP has also engaged in extensive public awareness efforts to promote flood insurance. But federal flood insurance may not give homeowners the coverage they need, or expect to have. When Hurricane Sandy hit the New York area, it is estimated that 55% of the one- to four-family homes in the high-risk flooding areas had flood insurance. Nevertheless, many homeowners found that they had no coverage for damage due to flooding-related earth movement, or that they had limited coverage for damage done to their basements (FEMA even demanded reimbursement for money it paid to one homeowner after deciding the first floor of her house was, in fact, a “basement”).

It is unwise to assume that your homeowner’s policy will protect you against all perils. A careful review of your policy should be the first step, followed by an investigation of the possible needed difference-in-conditions policies.